JUST LETTING YOU KNOW
Let’s talk Transports here. Last week I mentioned that I don’t follow the Dow Theory. Just so you know, the Dow Theory is based on the idea that the Transports should be sync with the Dow. And if the Dow is rising and the transports aren’t, that is a negative divergence that’ll come back to haunt the Dow and S&P and the rest.
The thought process is that the Transports move things, people, coal…you know all that stuff – and it’s a harbinger of good or bad — and you want to have the Transports in sync.
Let me just say this. They’re not in sync right now. They’re not acting terribly, but they’re not acting very well. But on a relative strength basis, the Transports continue to act poorly vs. a lot of other stuff.
My guess on it is that the higher oil prices are affecting the airlines and some other things. I am not a Dow Theory guy. But I know some very smart people that are, so we tend it watch it no matter what. And we’re going to watch it closely. If the Transports really start to break down we will let you know and we’ll talk about it.
But really, they don’t get into trouble until 4880 is taken out and most importantly, 4783. If those areas are taken out, then – trouble. We closed at about 5070 today. I do want you to know that the Transports are trading below the 200-day moving average. I think it’s the only major sector that‘s doing that at this point in time.
So we’re not going to shrug it off, but we’re going to watch and keep it in our file manager.
The areas are acting well in the Transports are the rails…that’s Union Pacific, CSX and Norfolk Southern.
How the Markets are Freak’in Held Hostage by One Man
Gold and Silver may have hit a near-term high. I’m not 100% sure, but they were up on the day and then finished down. It would be normal if they pulled back here a little bit after a couple gap moves last week on the Fed nausea because they don’t shut up. I’m not even saying they’re going to pull back.
Let me explain how things work in the markets. We get this first move up. Let’s say you hit a little near-term high here and it starts to pull back. We then start to see if the stair-steps start to go upwards. That’s all. Too early to tell.
Keep in mind there’s massive resistance all the way up, as they move up.
That leads me into Friday, the day before a 3-day weekend into Labor Day – at the end of the summer, where volume’s going to be light, and typically nobody’s going to pay attention, Ben Bernanke is going to be in Jackson Hole, Wyoming for some “love fest” where he’s going to do a speech.
Now in the past two weeks. The Fed first came out and didn’t mention anything about more printing of money. Then, they came out with “possible” printing of money. Then another Fed head came out and said…no – not now, we need to see more.
And then Bernanke released a letter of answers to questions from Darryl Issa that, yeah it’ll potentially be good news if we print more money by buying bonds.
So they’ve been back and forth, leading into today when another Fed head came out and said…we need more information.
So back and forth, back and forth, back and forth…
We’re getting different yapping from different people in the Fed to confuse the heck out of the market that leads us into Friday.
And I’m sitting here asking myself the question, “What do the markets expect?”
- Do the markets expect him to announce more printing of money? Because if he doesn’t, what does that mean?
- If the markets doesn’t expect and he does, what does that mean?
Do you know why I’m doing this exercise with you? Because we’re freak’in held hostage by one man. Markets around the globe are being held hostage by the whims of one man – on whether he is going to get Barbara Eden out of the Jeannie bottle so he can ask her to conjure up a trillion bucks so we can buy bonds and make interest rates go lower so the economy gets better.
That’s what we’re dealing with here. We’ve always had to deal with the Fed, but not in the way we have to now. Our economy is only so big. And the amount of issuance in bonds is just so much on a yearly basis.
Yet the Fed has soaked up over 60% of the past year’s. And I have to ask myself the question, “What happens if they stop? Is that meaningful?
Because I don’t know about you, but I’m not buying 10-year bonds and only getting 1.6%. I’m not buying 30-year bond and only getting 2.7% considering the fact that I have 10-year and 30-day risk.
So with this artificially manipulated and inflated market – I have to worry about Friday!
What is one man going to do? And if he has three shots of tequila beforehand is he going to do one thing AND if he has five shots, is he going to do another?
I’m trying to make a comedy out of this, but it really isn’t a comedy. And it’s amazing to me that Wall Street is falling into this trap. And the only reason they have is that the markets have moved up whenever the Feds have done something. I can promise you that if the markets ever react poorly to the Fed’s print money – you would not believe the loudness of the calls for Bernanke to be fired that would pervade the air.
They will rip him to shreds.
So it’s going to be interesting Friday. Yippee yay yay.
We’re depending a man who’s inflated two bubbles, watch them both crash and the answer to each one of those crashes was to inflate more bubbles. Yippee yay yay.
We’re waiting for a man who said subprime lending was fabulous and the housing market was a-ok in 2006 and 2007 and would not affect the economy. Yippee yay yay.
One of the major jobs of this man was to oversee lenders. And he did not oversee lenders when they were giving out money to people who could not afford the first payment on their mortgage on a place that they bought that was not going to be built for three years and they were paying double what the somebody else paid six months earlier. Yippee yay yay.
We’re depending on this man’s wisdom. Yippee yay yay.
Have I thrilled you yet?
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Gary Kaltbaum owns Kaltbaum Capital Management, LLC (“KCM”), an investment adviser registered with the U.S. Securities and Exchange Commission. The opinions expressed herein are those of Mr. Kaltbaum and may not reflect those of KCM. The information offered in this publication is general information that does not take into account the individual circumstances, financial situation or individual needs of an investor. The information herein has been obtained from sources believed to be reliable, but we cannot assure its accuracy or completeness. Neither the information nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. Any reference to past performance is not to be implied or construed as a guarantee of future results.